False Alarm: Amazon Did Not Cut Off Thousands of Vendors Last Week

Last week, news spread quickly that Amazon suddenly—and perhaps heartlessly—cut off thousands of vendors by simply not placing orders with them. This, in turn, prompted panic, as these companies would have no choice but to sell directly to Amazon customers or be forever estranged from 150 million unique monthly U.S. visitors.

But fear not, Amazon vendors. While change is coming to the Amazon Marketplace, it is not here yet, and it’s certainly not the doomsday scenario that causes Amazon’s Vendor and Seller marketplaces to merge.

Communication breakdown
Amazon’s habit of playing its cards close to its vest fanned the flames of speculation, leaving spooked vendors with generic statements from service reps. Case in point: An Amazon spokesperson said in a statement, “We regularly review our selling partner relationships and may make changes when we see an opportunity to provide customers with improved selection, value and convenience.” This confusing language led people to do what people do when they need more information: talk among themselves in online forums.

An additional accelerant was the realization that those not receiving purchase orders were almost exclusively smaller vendors.

And while the new One Vendor marketplace is coming eventually and should actually be good news for sellers, vendors and Amazon alike, the former still have some time to prepare. And as of March 11, everything is back to normal for many.

It’s still not clear why the interruption occurred, however.

“The boilerplate response from Amazon included a reference to ‘making sure vendors were signed up for Brand Registry [a new service that helps brands protect their intellectual property],’ but [it’s] hard to say if that will result in a policy requirement,” Pluimer said. “I have a hard time believing Amazon would just shut out vendors and not explain anything. That’s like giving Walmart a gift.”

“One of many challenges with Amazon is the way they communicate to their vendors, sellers, press, analysts—they are not sharers when it comes to information,” said David Hutchinson, national director of paid platform merchandising at digital agency iProspect. “And when you don’t share, people jump to conclusions.”

Pluimer, however, said his guess is Amazon was dipping its toe into merging Vendor Central and Seller Central into One Vendor, but it “kind of bungled the execution.”

“Amazon works at massive scale,” he said. “Its systems are automated, so … making changes in the system are really hard and it’s easy for them to make mistakes and—oops, you forgot to send out orders.”

“One of many challenges with Amazon is the way they communicate to their vendors, sellers, press, analysts—they are not sharers when it comes to information. And when you don’t share, people jump to conclusions.”
David Hutchinson, national director of paid platform merchandising, iProspect
Hutchinson, too, suspects there was “some backend tech issue.”

Pluimer also noted that order interruptions are relatively common, such as when Amazon issues a proposal to buy products in bulk in exchange for a discount. The vendor must then accept or reject the offer, which could interrupt the order replenishment cycle if the vendor doesn’t respond in time.

“And it just so happens, a bunch of bulk proposals went out last week,” he added.

And, Hutchinson said, the panic will continue until Amazon reveals more about its consolidated marketplace, One Vendor, which will combine Vendor Central and Seller Central.

In Amazon’s universe, vendors are an invitation-only group of big brands with lots of inventory and demand in which Amazon purchases products directly and controls pricing—and therefore profitability.

“A lot of the time, that’s hard for big brands to swallow—especially if Amazon is coming along and undercutting your dot-come site and any retail price out there,” Hutchinson said.
But vendors also have access to brand store pages, high-quality site content and their own in-house vendor managers. Sellers, on the other hand, use self-service tools and don’t get as much support.

Pluimer said Amazon knows large, influential brands like Nike or Levi’s require more of a hands-on approach, so it is trying to balance fostering those relationships with automation where possible.

“[Amazon has] big brands that are sellers because they want that control on pricing, but the downside is they have to ship [what they sell]. … That’s something that the industry has wrestled with—do we get completely in bed with Amazon and unfortunately let them control pricing and profitability or take far more time building up the team to shift the product and work harder but have one price across industries?” Hutchinson said. “That’s been the debate for a long time.”

One Vendor will yield a more straightforward interface and provide sellers and vendors access to the same tools. But it will also save Amazon some bucks.

“It costs a lot to run two different systems and there’s confusion to brands,” Hutchinson said. “Amazon is working behind the scenes to create One Vendor to bring the two together and is going to make a judgment call that says, ‘You’re all going to be in this one system, but for some brands that we deem necessary, we will autoconvert you into vendors. And some sellers will be autoconverted into vendors, and some vendors will be autoconverted into sellers.”

Will Margaritis, senior vice president of ecommerce at Dentsu Aegis, said Amazon can increase profitability by shifting vendors to sellers because the manufacturer bears the burden of carrying inventory, and Amazon can 86 some of its highly paid vendor managers.

Pluimer said One Vendor helps Amazon align its retail and marketing strategies.

“Retail and marketing were two different teams at Amazon that competed against each other in loose terms, so what Amazon is trying to do with One Vendor is eliminate that competition and have a strategy aligned between marketing and retail on what brands get sold which way,” he said. “Everything I’ve heard about that is it’s a long-range plan. They will go step by step. So this business [last] week with POs not getting issued and claims of being cut off is counter to everything I’ve heard at Amazon.”